Yen’s Fall Adds Complexity to BoJ’s Rate Hike Timing

The yen’s fast fall past 150 against the dollar has added a further complication for the Bank of Japan (BoJ). 

They are now trying to figure out the best time to hike interest rates – a thing that hasn’t happened since 2007.

Most BoJ watchers expect Governor Ueda to increase the rate in either March or April. 

What does that mean exactly? Raising the rate earlier might help the yen recover faster.  However, economists and analysts pointed out that the central bank does not want to seem as if it is just reacting to market moves.

 

Source: Bloomberg

Yuichi Kodama – Chief Economist at Meiji Yasuda Research Institute – doesn’t “rule out the chance of liftoff in March” but his bet is still on April, as long as the yen stays around this level.

• US inflation numbers came out higher than expected, which pushed the dollar to sharply strengthen against the yen overnight.

•  Subsequently, market sentiment is no longer expecting the Federal Reserve to lower interest rates anytime soon. 

• The sudden move pushed Japan’s top currency official to issue his strongest warning in months about speculative market moves. 

The story continues

Vice Finance Minister for International Affairs, Masato Kanda, hinted early Wednesday that Japan might step in to control its currency. 

This comes exactly after the yen dropped to 150.89 per dollar early morning in Tokyo. 

He followed up by saying that both his ministry and the BoJ are in close contact – with the government supporting whatever decision the Bank of Japan makes. 

Did you know? Japan intervened directly in the foreign exchange markets three times in 2022. This happened when the yen hit its lowest levels in decades, almost reaching 152 against the dollar. 

• The yen has fallen about 6.4% this year against the dollar – the most among major currencies. 

The BoJ has already reduced its control over bond yields by making three changes to its yield curve control program since December 2022. 

These moves were seen by BoJ watchers as an attempt to ease pressure on the yen.